In recessions, cash is short and businesses and individuals seek to raise cash by any means practical in order to prepare themselves for the tough times ahead. In a world in which U.S. currency is held as the global reserve, cash means U.S. dollars. In short, institutions and individuals are selling any asset that is not nailed down (stocks, corporate bonds, etc.) and buying U.S. dollars. This has resulted in plummeting asset prices and a rising dollar. However, this dynamic cannot exist in perpetuity.

Gold is poised for a dramatic surge and could blast through $2,000 an ounce by the end of next year as central banks flood the world’s monetary system with liquidity, according to an internal client note from the US bank Citigroup.

The bank said the damage caused by the financial excesses of the last quarter century was forcing the world’s authorities to take steps that had never been tried before.

This gamble was likely to end in one of two extreme ways: with either a resurgence of inflation; or a downward spiral into depression, civil disorder, and possibly wars. Both outcomes will cause a rush for gold.

“They are throwing the kitchen sink at this,” said Tom Fitzpatrick, the bank’s chief technical strategist.

“The world is not going back to normal after the magnitude of what they have done. When the dust settles this will either work, and the money they have pushed into the system will feed though into an inflation shock.

Ray Soifer, a retired executive from Brown Brothers Harriman and a Harvard Business School graduate, designed the famous metric for reading the HBS stats. When 10% or less of a graduating class take Wall Street jobs, it’s a long-term buy signal. When 30% or more take market sensitive Wall Street jobs, it’s a big flashing sell signal. ..

…This year, for the third year in a row, the HBS stats are sending a loud and clear sell signal. This year, some 41% of Harvard Business School’s graduate found work on Wall Street. That’s actually a year over year increase, up from 40% last year, 37% the year before that, 30% in 2005 and 26% for the class of 2004….

Drawn from independent research and diverse published sources, the following table seeks to provide as precise an accounting of the crisis as the public record currently permits. By my calculations, the combined total of existing and announced outlays from the Federal Reserve and from U.S. government agencies that are directly attributable to the financial crisis has ballooned to more than $8 trillion.

The word “bailout,” which shot to prominence amid the financial meltdown, was looked up so often at Merriam-Webster’s online dictionary that the publisher says it was an easy choice for its 2008 Word of the Year…

The Cynical Economist Bet $1, that the word of the year 2009 is going to be BLOWOUT!!!